Summary adjudication of complex share transmission disputes involving fraud and laches violates natural justice and patent illegality.

The Petitioner (ABB) challenged an Arbitral Award dated August 6, 2024, passed under SEBI’s Online Dispute Resolution (ODR) framework.

The dispute concerned the transmission of 175 shares originally held by the Respondent’s (Jaisingh) father, who died in 1988.

In 1992, the RTA (TCS) returned the transmission application to Jaisingh’s advocate, Mr. Talreja, seeking a Probate.

Talreja allegedly misplaced the original certificates until 2021.

Meanwhile, the shares were dematerialized by third parties in 1998-99.

After SEBI closed his complaints, Jaisingh invoked ODR arbitration.

The Arbitral Tribunal directed ABB to reinstate the shares (now split/demerged) or pay market value compensation, despite conducting only one hearing on a Section 16 application and deciding the matter without a trial on merits or evidence.

1. Whether the Arbitral Tribunal violated principles of natural justice by rendering a summary award without a hearing after the completion of pleadings.

2. Whether the dispute involving allegations of fraud and third-party rights was arbitrable under the ODR framework.

3. Whether the claim was barred by limitation, given the 29-year delay between the return of certificates in 1992 and the fresh claim in 2021.

4. Whether the assessment of damages based on market value at the date of the award was patently illegal.

The Court applied Section 34 of the Arbitration and Conciliation Act, 1996, regarding the setting aside of awards for patent illegality and violations of natural justice.

It examined the SEBI ODR Master Circular dated July 31, 2023, concerning the 60-day deadline for awards.

It referred to the doctrine of arbitrability concerning "serious allegations of fraud" and disputes involving rights in rem.

It also considered the Companies Act, 2013, regarding the rectification of the Register of Members and the prohibition on a company purchasing its own shares except via buy-back.

The Court found the Arbitral Tribunal’s conduct "absurd, irrational and perverse".

The Tribunal concluded hearings before the Statement of Defence or the final quantified claim was even filed, citing a "sacrosanct" 60-day deadline that had no clear commencement date.

The Tribunal improperly applied a "strict liability" standard to ABB for the alleged fraud of its agents (RTAs) while dismissing Jaisingh's 30-year silence and the role of his advocate, Talreja, without any evidence or cross-examination.

Legally, the award was flawed as it directed ABB to transfer its own shares (violating company law) and ignored that the shares were held by third-party institutional investors who were not parties to the arbitration.

The Court held that a complex fraud involving third-party interests is non-arbitrable as it has in rem consequences.

It held that the award was patently illegal due to the summary nature of the proceedings, the failure to adjudicate on limitation, and the erroneous assessment of damages without considering contributory negligence.

The Court directed Jaisingh to return the amounts already released to him by the BSE, to be deposited with the Prothonotary and Senior Master within four weeks, for subsequent release to ABB.